April 10, 2018 / 12:09 PM / 4 months ago

French competitiveness decline halted but not reversed: Villeroy

PARIS (Reuters) - France has halted a long decline in its international competitiveness but still needs to do more to claw back lost ground, Bank of France governor Francois Villeroy de Galhau said on Tuesday.

FILE PHOTO: Governor of the Bank of France Francois Villeroy de Galhau attends a press conference after the Franco-German Financial Council meeting in Berlin, Germany, September 23, 2016. REUTERS/Axel Schmidt

A payroll tax credit scheme launched in 2014 has helped make French firms more competitive on cost, but they still struggle on quality with fewer companies positioned at the high end of their market than in Germany, Villeroy said.

“French exporters need to improve their positioning, (and) increase their numbers,” Villeroy said as he presented the central bank’s annual report on the balance of payments.

But ultimately firms needed workers with the right skills to make better products, making the success of a government reform of apprenticeships and vocational training all the more critical, he said.

A growing number of French firms say that they can not find enough skilled labor to meet clients’ order, holding back a broader economic recovery under way.

MARKING TIME

France trimmed its current account deficit last year to 13.1 billion euros ($16.14 billion) from 16.7 billion euros the previous year as higher tourism revenues helped offset a bigger energy bill, according to the balance of payments report.

France has run a current account deficit every year since 2006 as its competitiveness waned. While it has not further deteriorated in recent years, the deficit has not been significantly reduced either.

“It’s like our overall competitiveness is marking time. We haven’t been able to get beyond stabilization,” Villeroy said.

The central bank estimates that foreign trade will cease to be a drag on the economy in the coming years, although it will not become a motor either as in other euro zone countries like German, Italy or Spain.

While French firms are struggling to win back market share lost abroad, foreign companies are increasingly tempted to invest in France as President Emmanuel Macron has sought to create a more business friendly environment.

France saw its best year for foreign direct investment in a decade last year with 44 billion euros, up from 32 billion euros in 2016.

($1 = 0.8116 euros)

Reporting by Leigh Thomas; Editing by Richard Balmforth

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